"Destruction" of Home Quality - words may offend!
Friday, July 3, 2009 at 10:39AM
Preface to this Blog Contribution
This edition of the blog was written by a new contributor, Mr. Grant Dorris. You can read his complete bio in the "Our bloggers" section - he is builder/contractor, LEED AP and Associate of IGP.
BE PREPARED . . . .
HIS WORDS MAY OFFEND A FEW READERS! 
PLEASE, IF YOU CAME TO US FROM A LINKEDIN GROUP, leave your comments here (below) so that so many more people can read your comments than just one Linkedin group!
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STRAIGHT TALK FROM THE FRONT LINE
This is my first contribution from the front line of homebuilding. I am one of the guys in the trenches who not only works on homes but also works with homeowners, builders and businesses to improve the quality of our built environment.
I want everyone to think about a staggering statistic – 80% of all homes are built by only 20% of all builders. This ultimately means that a small percentage of homebuilders control the end products that are available to consumers. Most all of these homes would be classified as production built or tract built homes. This relatively small percentage of builders can take one of two paths:
1. Understand that it is their responsibility to build safe, comfortable living environments that balance with their surrounding natural environments - and accomplish this by integrating planning & design with climate & site analysis to maximize the energy efficiency, durability, indoor environmental quality and water conservation of the structures they build, while simultaneously minimizing waste and our impact on natural resources.
2. Choose the path that is fast, labor saving, cheap, and based on cleverness rather than quality – basically the exact opposite of Path #1.
Unfortunately, most choose Path #2.
This is the problem with the today’s homebuilding industry – it is not about building homes, it is about moving money and homes are just the vehicle by which their money is moved. The 20% doesn't really build anything, at least in a technical sense. All of the physical work is performed by subcontractors. From an article titled Chasing Ground by Jon Gertner, published October 16, 2005: “These subcontractors answer to a team of Toll executives at every site who are trained to see a community's physical manifestation as part of the larger process of packaging and selling the American dream. ''We're really a marketing company that happens to build houses,'' Doug Yearley told me.” Increasing shareholder value will never get anyone a quality home, and, up until recently, the home buyer has not cared.
For the past 10 – 12 years, homeowners have enjoyed the most prolific real estate market that they will experience for many years to come. Many would live in a house for a couple of years, sell it, pocket a few thousand dollars and move to the next “it” subdivision. These were not lateral moves that reduced principal owed, they were “upgrades” that incurred more debt. Times were good, financing was easy and real estate appreciated at a rapid pace. Well, the music has now stopped and everyone has had to find a chair, so to speak. Most homeowners are now stuck in their current homes 
for a variety of reasons and will have to stay in their current home for longer than they probably anticipated. This brings me to the problem many of them will face: They have not lived in a house long enough to find out just how unsustainable and/or poorly built it is.
To truly understand the flawed business model of today’s homebuilding industry, we need to look at the basic fundamentals of how20% of all homebuilders (production builders) operate. Plans, designs and specifications are often conceived in corporate offices far away from the actual building site and in a “perfect world” scenario. This perfect world scenario means that everything is flat, perfectly conditioned and within budget – just like the desk it was conceived upon. There is no thought paid to anything other than mesmerizing the consumer with fancy trim, granite countertops and aesthetic distractions. Quality, durability, efficiency, conservation, community and environmental stewardship are not thought to maximize profit like insignificant trinkets.
Subcontractors hired to perform the various trades that render a house complete are paid less than market rates because of the quantity of work involved. As building has slowed, these same subs are forced to take pay cuts to make up for the decline in sales – take one for the team, if you will.
Case in point, I recently received a letter from a large homebuilder I perform work for. I will paraphrase the gist of the letter demanding their second round of cuts:
REDUCE THE COST OF YOUR LABOR AND/OR MATERIALS BY [AN ADDITIONAL] 10% OR WE WILL FIND ANOTHER QUALIFIED CONTRACTOR WHO IS WILLING TO PERFORM THE WORK FOR LESS MONEY.
The letter states a couple of things of importance to note: “We can survive, provided we can drive costs out of our product” and “We know this will be a difficult time and one without [subcontractor] profitability.”
Collectively, homebuilders are “driving the costs out of their products” by further cutting quality, durability, efficiency, indoor air quality, specifications and workmanship. Furthermore, they are fully aware that the price they are willing to pay for work will not result in any profitability for the contractors performing the work. Are these the conditions under which anyone would want to have a home constructed?
For the past few years, it has been bad enough that consumers did not care about the lack of quality in the homebuilding industry because they were profiting from it. Imagine what we will get now that builders are intentionally and purposefully reducing the quality of an already questionable product. Throw in the fact that the subcontractors who were somewhat qualified to work on these homes are being driven out of the market and are being replaced by less qualified subcontractors who are guaranteed to not make a profit, and we have a real recipe for disaster.
The uneducated public will think they are getting the deal of a lifetime. They will be wrong.
Reader Comments (20)
I agree wholeheartedly with your asessment of the housing industry. In addition to new homes being commodities, and bad examples at that, we need to address the fact that the existing housing stock must be upgraded and new home construction should never again reach the fever pitch of the last decades. There is a lot of resistance from the industry against the current energy bill in Congress, and it recently occurred to me that the majority, if not all, of that resistance comes from people who have never built or lived in an efficient, healthy, and durable home. They fight improved standards from a defensive position and a lack of knowledge. Virtually everyone who has built, renovated, or lived in a green home understands the value, and the fact that the additional costs are minimal, if any to do the right thing. We need to call these obstructionists to task as well as lobby the Senate to pass the bill as is or even improve it so that there is demand and requirements that housing be high quality and efficient, and not just continue producing the substandard garbage we call new homes.
Grant - Thank you for this report from the front lines. The first thought that came to me in your description of the housing market is the similarity to the auto leasing industry. Once automakers began to view leasing a car as an annuity, it seemed as if many of them stopped focusing on long term durability and quality; what sense would it make if the consumer only bought one car every 20 years? By keeping drivers in new cars every 3-4 years, you get more cars being pumped out keeping factories busy and profits soaring through monthly payments but I believe you create less long-term sustainability and brand loyalty. By creating a real estate system where consumers are constantly "trading up" without reducing debt, the market kept building more and larger homes at lower costs through downward pressure on trade contractors and suppliers. As you keenly point out, homeowners are now stuck in homes that were not built to last since the bottom dropped out.
As discussed in a previous entry on this site (the Las Vegas "Green" mansion), there seems to be a disconnect between what we, as consumers, think we NEED versus what we WANT. I believe that we NEED to WANT LESS! The more we are driven to new and bigger and better, the more we will seek to find some way to justify our want-based decisions with need-based intellect. For example, we NEED to reduce our energy consumption, so in our newly constructed 6,500 sf house, we will put energy efficient lighting and high efficiency HVAC equipment etc etc etc...does that make sense?
This weekend, I was at a cookout in a relatively new country club community in an affluent suburb. It happened to have rained pretty heavily for a few days prior and the backyards of these homes were swampier than could have been expected. Was that the rain's fault, or the fact that over-development limited the surface penetration and created a larger runoff and surface water retention? We see what we want to see, not always what is around us all the time.
As a new Interior Designer and as a long time home buyer/renovator, I can whole heartedly agree with Grant. There are other obstacles to a couple wanting to build a home (at least in the Northeast Ohio area) and that is community rules/regulations. When my husband & I wanted to build a small, modest and sustainable home we had several problems: 1. All the communities that we considered "walkable" would not allow us to build anything hinting of "modular" 2. Many neighborhoods would not allow us to build anything on a lot unless it matched in price and looks the other mini-mansions
3. we couldn't find a builder willing to do a small, modest spec house. It wasn't worth their time and energy apparently. So, we have continued to buy older homes (mid-century and older) and rehab them. We currently live in a 1926 tudor cottage that has all original wood floors, trim, plaster walls, etc. They definately don't build them like they use to.
I find your comments interesting, but ill-conceived. Who are you to impose your values on the purchasing decisions of other individuals? You likely own a well-constructed home that makes use of the landscape to maximize the natural efficiencies that are available. Those people who choose not to make an informed decision on these items will own a home that is valued less than yours. It is not the fault of the homebuilders that their customers do not demand higher quality. If they truly demanded higher quality, they would not purchase that home. When I was house shopping two years ago, I saw LOTS of poorly constructed houses...and I didn't buy any of them. You say: "Increasing shareholder value will never get anyone a quality home, and, up until recently, the home buyer has not cared." This is false. I know several homebuilders who build a quality product and are not currently experiencing as many difficulties as those who cut corners. Those who have cut corners have seen their inventories rise, values fall and have defaulted on many loans. These companies will likely not survive this business cycle; if they do, it will be as a shadow of their former selves. This is how it should be. The people to whom they sold houses are not victims any more than the homebuilders are victims of the bubble they created.
I agree that "in a perfect world" a development should be conceived as you postulate above. However, a community such as you describe above costs more. Does it provide more value? I have little doubt it certainly does, but that is not the point. I don't shop at Wal-mart, but lots of people do because they can't afford to shop anywhere else. I don't see any need to vilify Wal-mart because they offer a cheap product. The car maker Kia provides a low cost automobile, but does anyone resent them for not making a product on par with Mercedes? No.
You can't legislate/regulate/mandate good decisions. Some people make bad decisions. They need to live with the consequences.
Amen Tony Cook. Very well said.
10% is nothing. As a builder/GC, who has built 4 homes for myself with my funds, I have seen first hand the bloat and profit subcontractors get away with. Plumbing is a good one. As a owner/builder I was able to pull permits and do the work myself, same codes, same inspections. The real eye opener was the end cost. Holy Crap. On a 5800sf house I saved myself over $35,000. I used quality materials and fixtures, from Wirsbo, Pex....................on down to all Kohler Fixture, including steam shower, 200gal hot water, rain heads, ect, ect.
So if we need to eliminate the price gouging and bloat to survive, I say it is about time!
Why are Architects not required on every home, that should help with the cookie cutter mentality of most builders.
Posted by phil craddock
I agree with your statements. It is a frightfully accurate statement of our economy in general. The buying public generally is a short term buyer of goods and services. Example leasing a new car for three years teaches our manufacturers they have a shorter window to be building their product to cycle through.
In markets where housing has a structural warranty that exceeds ten years or more the home has generally better quality than where the structural warranty of one years. This is nuts for a product that has a mortgage life of thirty to forty years. Let the buyers "care" should be what is needed to improve the housing stock built in our country.
Posted by John Arnott
Sadly, an architect usually is involved in almost every home. Some architects market their designs through home plan magazines that are sold in the check-out line of the grocery store. Some architects will gladly design three "model" homes that a developer will build a hundred times over. The planning departments and politicos allow hundred home tracts and we then snatch up all these cookie cutter homes because they were less expensive. (or so we are lead to believe.)
We architects do not get involved enough in the planning departments, city commissions, county boards, etc. If we were, we would be in a better position to educate the public on good design and have a stronger voice in preventing the bad decisions that have been made in the past.
Posted by Brian Sperber, AIA
The problem is not if an Architect was hired... it is the basic mentality of the developer/builder. A well designed plan for one site does not make it well designed for the next. Unfortunately, with subdivision mentality, we have little to no control of where the design is going to get built - and if an architect demands involvement with every site, he will most likely lose his client.
That is why I don't have developers as clients.
You can say the same of every big box store and strip mall in the country. Some how in the last 30 years, the value an architect brings to the table has been lost due to blind greed.
Posted by David Boersma, AIA, NCARB
Mr. Austin -
I greatly appreciate your contributions to the discussion about "green" development. I wonder if you have heard of a concept known as "cohousing"? I'd like to know your thoughts and how this model for sustainable community development might gain more attention in every sector from designers to end users as an alternative to so called "green" mcmansions and suburban sprawl development patterns. General information about cohousing may be found at http://www.cohousing.org. Or website for my development firm may be found at http://www.cohousingcollaborative.com.
Many thanks,
Meda Ling
Principal Partner
Cohousing Collaborative, LLC
Certainly "cookie cutter" homes lined up in large subdivisions are aesthetically depressing. They're cheap to build, though, and that's put them within reach of buyers who cannot afford custom homes. Hanging some individualizing ginger bread on them, or other touches of architectural style-du-jour, might make them aesthetically less offensive to drive past, but buyers in the mass market buy space, not aesthetics. If they can afford it, they'll pay a little more for energy efficiency. Or a couple of trees.
Brian's right - the first thing needed is architects' involvement with local politics. Located one thousand homes for an aging population 5 miles from an adequate shopping center and health care facilities is madness. Compelling families to own 2 cars in order to get to work and to shop is madness. The failures of basic community planning are even more depressing than the aesthetic failures.
I recently toured a Del Webb/Pulte development for "over 55 active adults" where each of 1500 homes had a four inch step at the front door and a screened porch with a 7 inch drop. Automatically, this meant that each home whose resident became disabled would require modifications that would have been cost free in the original design - if anyone had cared. This is the largest builder of over 55 communities in the country, and they are clueless. Unless codes and zoning ordinances change, they won't, because they don't care. That's where architects can get involved, and should.
Posted by Philip Kabza
Architects have to compete in the free market. The beauty of the free market is that we have only ourselves to blame if there is not a demand for our services. We have to create better public opinion by offering the best design and building solutions to our clients and potential clients. We need to educate people why architects are better providers of those solutions because of their ability and competence in considering energy efficiency, appropriate building assemblies, unique aesthetic responses to each site constraint, training in the more technical aspects of the scienc of design and building and the ability to understand each client's unique design needs. If the public doesn't think we can provide this within their budget, they will naturally seek it from other sources. How many of you have custom furniture, custom cars, custom tailored clothes? The only way to compete with the "out of the box" building is to show how in the wholistic building considerations, our solutions are economically competitive and consider the client's unique needs better than they will get from the "out of the box" guys.
Posted by Michael Turner, AIA, NCARB
Michael,
That is dead on. Markets do help shape need and improvements. The value of Architects has been lost because of a driving market.
Yet with Tony Cook's comments, I'm slightly vexed. When so much damage is done (natural resources used, land use, infrastructure, micro-ecology) with these developments, then in my mind it is more than just a bad purchasing decision by individuals in a market. It affects us all and affects our future.
Grant has it nailed.
I have worked in marketing within the building industry for 15 years and have endeavored to know it fairly intimately through this experience and lately through the process of building of my home with a builder, potentially Canada's first LEED home to be registered under the Canada Green Building Council pilot program.
When my wife and I began the design process 3 years ago, we believed the barriers to sustainable building were with the industry. So we set out to do what we could to facilitate change and educate every cog in the wheel from builder to trade, every day for 3 years using education, inspiration and lots and lots of coaxing.
At the close of the build, we have concluded the same as Grant, that the system is flawed and will not change without legislation, consumer education and desire creation.
Consequently we do what we can to inspire every potential custom home buyer who comes by the house that they can demand a better home; be more conservative without compromise, inspire better quality from all involved and lesson their impact on the ecology. They only have to know more.
In the end, I think there is a lot of work to do within the Green Building Councils who focus solely on the industry and not with the consumer. They are trying to initiate change from the toilet up. I believe they have to affect what the consumer eats; consumes, wants and understands while simultaneously driving new standards. This way, when minimum code regulations and building practices sharpen up, and sustainable options abound, there will be a customer who will want it.
Imber Akse House
www.imberaksehouse.ca
My living preferences have always been small town or downtown. I live one block from the library and four blocks from the elementary school in one direction and business district in the other. I am the third owner of an 84 year old house. Recently my work has taken me to doing handyman services in Houston, talk about culture shock! This is a city of "developments" with amenities but minimal services. Owner associations replace neighborhoods where people are more concerned about their property values than their neighbors. There are gates, but I don't see the communities. There are exceptions, primarily in older areas of town, go figure. One of the virtues of small town communities is stability, developments are clearly more of a financial proposition and a risky one given recent experience.
Given such a pre-emptive warning, I was expecting the blog to be much more critical of the housing industry. Having worked both sides of the 80/20 split, I can attest to the fact that “Path 2” is the norm among homebuilders.
I learned very early in my career as an architect and town planner that the first goal of any business should be to make profit, because without financial success, you will not survive for very long. The method of reaching profitable goals is where the tracks verge.
The best builders and developers, in my opinion, are those that fully understand the financial fundamentals of homebuilding, yet explore the market-based, site specific solutions to each unique neighborhood. A one-size fits all mentality has been to the detriment of a majority of new communities.
Some of the twenty percent builders achieve greatness where most will not tread. One of the clients with whom I have had the great pleasure to work, has always executed creative, marketable neighborhoods where others have had no vision. I believe success is based on their philosophy of creating unique and desirable neighborhoods, where others just looked at the economics of “The Deal.” Their vision allows them to build truly remarkable neighborhoods with extraordinary monetary returns. Beginning with the end result in mind and the process to bring the vision to reality is where they set themselves apart from the competition. Unfortunately, this developer/builder mindset is rare.
When I point out these types of successes to most builders and developers, the response is often full of incorrect assumptions. Broad statements that it “costs more” are false. It does take more effort; advanced and detailed planning, thinking outside of the norm and creative solutions do require patience and expertise beyond the mindless, cookie-cutter solutions typically presented. Gaining the proper entitlements, working with municipalities, understanding and enhancing the natural environment and artfully building each piece of the neighborhood puzzle should be a logical part of the development process, but too often are thought of as obstacles to project scheduling and profitability. It is possible to do both.
I am not sure consumers do not care about the lack of quality in homebuilding, although there is enough crap built out there to prove me wrong. Without the significant, short-term financial returns on house purchases we have experienced in the recent past, I believe the “uneducated public” will learn quickly. The housing industry is due for a change.
A lot of builders I speak with tell me they “Can’t wait to get back to normal.” If the past decade is what they consider “normal,” I believe they are in for a long wait.
I realize the immediate reaction to this economic disaster is to build cheaper by driving down costs, but I agree with Grant Dorris. Many generational land assets have land plans that are completely outdated for today’s market. Without thoughtful “reinvention” of the homebuilding process, building cheaper, smaller, entry-level houses on gigundo, move-up lots is not a sustainable, long-term formula for success.
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